WASHINGTON (CNNfn) - The White House and congressional negotiators agreed early Friday on compromises that clear the way for passage of major legislation overhauling Depression-era banking and financial services laws.
Administration officials said they won agreement on a provision that can block mergers of banks that cannot prove they comply with the Community Reinvestment Act, which requires banks to provide loans and other services to poorer and underserved areas.
After two decades of trying, both the House of Representatives and the Senate this year passed bills to allow banks, brokers and insurers to enter each others' businesses, a change for which the banking industry has lobbied aggressively. A conference committee has been trying to reconcile the measures and avoid a threatened presidential veto.
"A resolution has been achieved that appears to represent a good-faith consensus in which the Treasury participated and both parties played a role," said House Banking Committee Chairman Jim Leach, an Iowa Republican. "We believe we're at a credible resolution."
The new law would repeal parts of the 1933 Glass-Steagall Act, which prevented banks from moving into the securities business, and was considered an archaic symbol of government regulation no longer relevant in a high technology world.
"Tonight we have laid the foundation to make history," Senate Banking Committee Chairman Phil Gramm, a Texas Republican, told the committee after senior Republican and Democratic lawmakers emerged from six hours of closed-door talks with administration officials.
Working through the night, they were able to reach a compromise on the politically charged issue of the Community Reinvestment Act (CRA).
"Nothing is done until the language is fully reviewed," Treasury Secretary Lawrence Summers said in a statement.
"But we are very pleased that the community reinvestment 'have and maintain' principle -- that no one with an unsatisfactory CRA rating can take advantage of the new powers under the bill -- has been fully met and that significant improvements ... were made in other areas."
"We believe we've come up with a reasonable, sensible compromise, one that allows banks to modernize but one that strongly protects the Community Reinvestment Act," said White House spokesman Jake Siewert. "In particular, we have secured the importance of the principle that banks with poor CRA records should not be given new powers to expand."

Both sides apparently yielded

Democrats had charged that provisions of the bill championed by Gramm would have rolled back the reinvestment act, something the White House repeatedly said it could not accept. Full details of the agreement were not available, but it appeared both sides had given ground.
An administration official who told CNN of the compromise said the White House "didn't yield to everything Senator Gramm wanted on regulatory relief, but there were concessions made that facilitated that agreement."
Gramm agreed that banks should have a satisfactory reinvestment rating before being permitted to merge with insurers or securities companies. The administration accepted less-frequent compliance examinations for some small banks and some public disclosure of deals between banks and community groups.
The conference committee approved the outline of the deal without seeing the formal language. The bill must now be signed by the majority of the conferees before it can go back to the House and Senate and be sent to the president.
Leach said he hoped the final product would be ready by early next week and would be passed quickly.
Some Democrats said they were pleased with the framework that had been agreed on and hoped that the bank reform effort could finally go forward.
"I am confident that we are going to have a bill," said Sen. Christopher Dodd of Connecticut. "I think we're there."
But others were less enthusiastic about a proposal they had not yet seen.
"We have a virtual approval of a nonexistent document," Massachusetts Rep. Edward Markey complained.
The bank reform effort has been strongly and vocally supported by U.S. financial companies, who say it is badly needed to allow them to compete better in the rapidly evolving global financial marketplace.

Key provisions of the reform bill

In addition to the repeal of parts of the 1933 Glass-Steagall Act, the bill tentatively agreed upon Friday:

Requires financial institutions to disclose in writing to customers their policies on collecting, using and protecting personal financial information;

Prohibits nonfinancial firms from moving into banking by setting up or acquiring federal savings and loan institutions; and

Allows the Federal Reserve and Treasury to split oversight over banks entering new financial activities.